wrong ans. will be downvoted

Exhibit 6.2 Alvertos Company: Charges to Operations, Capital Lease versus Operating Leases Operating Capital Lease Lease Difference Charges Year Depreciation Executory Interest interest Total Charge Costs 1996 $3,000.00 $14,990.81 $1,810.109 $10,000.00 $10,000.00 $10,000.00 $3,800.919 $2,981.929 1997 $3,000.00 $14,990.81 $991.119 $90.231 1998 $3,000.00 $16,800.919 $15,981.929 $15,081.041 $14,090.064 $13,000.000 1999 $2,081.041 $1,090.064 $------- $9,953.953 $10,000.00 $10,000.00 $50,000.00 $3,000.00 $3,000.00 $15,000.00 2000 $14,990.81 $14,990.81 $14,990.81 $74,954.05 $(900.746) $(1,990,81) S----0-- $74,954.05 a. Higher short- and long-term debt because of the recognition of Obligations under Capital Lease." b. Higher fixed assets because of the recognition of "'Leased Equipment under Capital Leases," and c. Lower income in the earlier years and higher income in the later years of the life of the lease. ACCOUNTING FOR LEASES BY THE LESSOR The lessor's interest in leases is related to the following three benefits: 1. Interest Revenue. Leasing is a form of financing, therefore financial institu- tions and leasing companies find leasing attractive because it provides com- petitive interest margins. 2. Tax Incentives. In many cases, companies that lease cannot use the tax ben- efit, but leasing provides them with an opportunity to transfer such tax ben- efits to another party (the lessor) in return for a lower rental rate on the leased asset. 3. High Residual Value. Another advantage to the lessor is the reversion of the property at the end of the lease term. Residual values can produce large profits. 10